For Whom the Legislation Bell Tolls

ROCHESTER — For the past few years there have been new efforts on the part of franchisees and their associations to pass fair franchising laws in various states. Executive director Jim Coen of the Maine Franchise Owners Association states, “There are many fine businesspeople who have been terribly harmed by predatory franchising behaviors, and we hope to put an end to that all consuming power these people hold with some protection for franchisees under the law in states.”

The International Franchise Association and its franchisor members repeatedly tell legislators that franchising is already over regulated and no state laws are needed. Perhaps what lawmakers need most in making their decision is seeing the faces of some of the franchise owners and hearing from their lips how they have been egregiously harmed in franchising.

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Four years ago to this day, Michael Barbera walked into his home in Rochester, New York and called 911. “I had an accident. No one needs an ambulance. There will be no danger to anyone. I’m in the bathroom and the front door will be open,” he stated in his emergency phone call.

When the investigating police officer arrived, he found the door cracked open about six inches. The officer announced himself several times, with no response. He then entered the residence and walked down the hallway to the bathroom.

The Greece Police Department report, parts of it redacted, states that the officer waited for additional backup to arrive before checking the rest of the residence. Eight officers and a technician arrived and two processed the death scene. One notified the medical examiner’s office. The examiner arrived at approximately 2:00 p.m. Michael was declared dead at 2:15 p.m., January 11, 2010.

The autopsy report confirmed the death as a suicide.

A franchisee’s difficult plight through failure

Michael Barbera was a single 58-year-old white male. At the time of his death he was operating his business under the banner of Power Marketing Direct or PMD Furniture Direct, a chain of dealerships. Family members, business associates and friends openly state they know why Mike killed himself. He had dug himself in to so much debt under PMD’s direction, he could not see his way out.

“Mike was literally penniless,” his sister Anita told Blue MauMau in February 2010. “And yes, it was because of the demands placed on him by PMD Furniture Direct, and I have the proof. PMD knew his death was a suicide, that he took his life because of his desperate situation in being isolated by PMD.

Blue MauMau contacted PMD’s general counsel Sheila Vitale in 2010 and asked her if she knew anything about Mike Barbera’s death or if she knew that he had committed suicide. “I don’t know. Some [family members] notified us that he had passed away. As far as I know, there was no confirmation one way or the other. The family has been pretty quiet because it was a sudden death as far as I know,” she said.

In 2009 the court determined that what PMD marketed as dealership licenses were actually dealership franchises. The unlawful firm was ordered to follow franchise law, which requires franchise registration and disclosure documents. Some business opportunity licensors tell their franchisees that they aren’t a franchisor in order to avoid franchise law requirements and steep franchising preparation fees.

When asked if Mike was ever a franchisee of the company, the attorney responded, “No, he was a dealer. That was Power Marketing Direct.” We’re PMD Furniture Direct which only offers franchise opportunities.” She explained that they started offering franchises in July 2009. When asked if she had ever worked for Power Marketing Direct, she answered, “No, I worked for the franchise entity.” She added, “We never, never offered [Mike] a franchise. He was a dealer with our affiliated company. And we are affiliated just as far as. . . some of our proprietary business that we teach. But that’s all.”

The PMD attorney said Mike had multiple issues. “I don’t know the details.” She said his family told the company he was in litigation over some rental properties that he owned, and he had some other family issues going on.

Mike’s sister feels the attorney lied. “Pat Benhoff, [a PMD franchisee and previous administrator of Power Marketing Direct] told me on the phone that they offered Mike a franchise. Why is Vitale telling Blue MauMau that they didn’t? Did she lie?” The sister also states that she knows her brother was affiliated with PMD Furniture Direct.

PMD pressured Michael into purchasing furniture and mattress inventory, paying hundreds of thousands of dollars. On top of that cost he had to pay his rent and advertising expenses. Anita said Mike’s business ended up with a loss. “I know this because I have his profit and loss statements.”

Mike’s sister also explained how dealers were required to use sales scripts issued from PMD that she feels misled customers when selling furniture. When she spoke to Benhoff, the top performing dealer, he confirmed that it was PMD’s general practice to take deposits from customers and use that money to pay the franchise’s own bills. When she asked him if he complied with those rules, he said yes. “That alone could have caused my brother so much guilt that he ended his life,” she said.>

Girlfriend relates Barbera’s story of fear

Michael’s suicide note was addressed to his girlfriend of four years.

Now living in Pennsylvania, Dot said she met Mike while he was running a very successful mattress sales business, working tirelessly. “What made PMD so hard to work for was their inflexibility.” She explained that each dealer was required to order a minimum amount of furniture every month. When times were rough during the recession and seasonal periods, PMD would increase their prices on merchandise. “If the dealers didn’t comply with company rules and quotas, PMD came down hard on them,” she said.

Even if a franchisee can buy a product with the same specifications elsewhere, franchisors often mandate that only its preferred vendor be used. Preferred vendors frequently give kickbacks to franchising firms for products that franchisors mandate their franchised store owners buy. In tough economic times, those extra margins and forced buys from franchisees can be particularly helpful to a franchisor’s bottom line. Because of the ease of abuse from a supplier that essentially has a monopoly in that chain, many independent franchisee associations advocate a franchisee’s right to purchase from any vendor goods and services that meet the same specifications and standards. But the cries of what those associations want almost always go unheeded.

“Mike had to miss the PMD sales conference because he didn’t have the money to go to it,” his girlfriend said. She said he had gone through all of his $500,000 retirement money and taken $100,000 out of his home by remortgaging it. He then racked up another hundred thousand in business loans and through his personal line of credit. “PMD knew all of this, but demanded he keep ordering, threatening to destroy him if he didn't,” she said.

If quotas and operating mandates are not kept, franchisors have the right to terminate a franchise. Franchisees typically sign non-compete clauses that kick in for years, essentially destroying the livelihood of the small business owner who crosses his franchisor.

Out of fear of financial failure, Mike was also ordering mattresses from other suppliers, and Dot said he was terrified PMD would find out. “He could get the same quality of mattresses and furniture from other suppliers for much less than he’d have to pay PMD.” She added, “Mike lived in terror that they’d discover what he was doing.” Mike thought the company’s attorneys would go after him until he was sent to prison. “PMD made an example of one former dealer who used another supplier by letting everyone in the company know they had the guy put into prison,” she explained.

Dot said, “Time after time, I would hear Mike reading his PMD script to a customer, ‘Funny you should call right now. A buddy of mine just lost his lease and asked me to help him sell off a shipment of high quality mattresses at a really good deal.’” That was a lie, of course. No buddy had just lost his lease. She said he would tell them to meet him at his warehouse immediately. “He knew they wouldn't show up if the appointment was too far off.”

When Mike told the company his business had fallen off, PMD showed no sympathy. They told him other dealers were doing just fine, that he must be doing something wrong. The girlfriend said Mike kept placing orders but couldn’t pay for the shipments. He had to wait to get more deposits from customers. But then he had to use those deposits for rent, phone bills, utilities and advertising expenses. His girlfriend said the company looked the other way when it came to franchisees using customer deposits to pay for dealer expenses.

“Mike kept blaming himself for not figuring out a way to satisfy all of his customers. He didn’t want to cheat or disappoint anyone,” she said. “The Saturday before he killed himself, I ordered some mattresses and furniture from him for my new place. Mike told me to stop trying to help him because it was over. He couldn’t hold on any longer,” she said.

One woman who worked with Mike when he first opened his business said she knew Mike’s business was falling apart. His house was in foreclosure and he had insurmountable debt. Mike asked her if she would take his dog because he was afraid he would become homeless. On January 9, Mike brought his dog to her house. “That was the last time I saw my dear friend,” she said.

The co-worker wrote Blue MauMau saying, “On January 11, 2010 Michael Barbera killed himself with a high-powered rifle, shot under his chin. No one should ever have to suffer the way Mike did, and no one should ever have to be under such anguish and desperation to choose suicide as the only way out.”

PMD’s business opportunity licensee operation switches to franchising

PMD was determined in 2008, prior to Mike’s death, to violate franchise laws, describing itself as a business opportunity licensor. In February 2009 the CEO announced in Furniture Today magazine that PMD was switching its dealerships to a franchise business format model. Later that year, while in litigation with the company, the PMD dealers formed the Associated Licensees of PMD.

Mike’s sister said she later learned that Mike had gone to a social services agency the previous August to receive help. “I’m sure PMD knew about it,” she said. At that time Anita was working with an attorney to put together a package of information to send to the Ohio Attorney General to expose what had happened to her brother while running his PMD furniture business.

Other PMD suicides?

There have been comments and hints of other possible PMD related suicides. Cindy, a former trainer for PMD, told Blue MauMau that another dealer, Steve, also committed suicide after he lost all of his money and left the chain. The COO of PMD notified the trainer that Steve had killed himself in a North Carolina hotel room. The executive said he was told that by Steve’s son. Another former dealer confirmed that information.

And yet another possible suicide . . . one former PMD dealer wrote Blue MauMau to say she had left the chain. She contacted Blue MauMau to say that her cousin, who had been a PMD dealer in Louisiana, had also committed suicide. Although he suffered from severe depression for most of his life, she feels his failing PMD business may have pushed him over the brink. She said, “It affected my aunt and cousins greatly.”

About Janet Sparks

Public Profile

Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.